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Corn market slides at midday on Monday

After beginning the week virtually unchanged, the corn market turned downward in the wake of the weekly export inspections report. That was rather surprising since the latest figure matched larger pre-report estimates. Ultimately, the report seemed to confirm the fact that greatly elevated U.S. prices are strangling export sales, which in turn implies the domestic market is overvalued. Trader disappointment with the soybean sales result may also have exaggerated the corn slide. March corn had fallen 8 cents to $7.22 3/4 by late morning, while the December 2013 contract dipped 4 1/4 cents to $6.23 3/4 per bushel.

Although soybean futures began the week strongly in apparent carry-over from late last week, prices reversed sharply in reaction to the Monday morning Export Inspections report. Traders were reportedly expecting a result in the 42.0-48.0 million-bushel range, but the USDA stated last week’s preliminary total at 37.0 million. The sizeable weekly reduction, suggests international buyers backed away from the U.S. soybeans in response to the sizeable increase in their costs. Having the nearby contracts prove unable to sustain their early push above the $15.00/bushel level probably prompted considerable technical selling as well. January beans were quoted 1 3/4 cents higher at $14.97 3/4 per bushel in late morning trading, while January oil had fallen 0.33 to 49.66 cents/pound and January meal had dipped $0.9 to $456.8/ton.

As with corn, the Monday morning inspections report stated the weekly wheat result at the upper end of industry forecasts, which on its face should have boosted futures values. That was not the case, since wheat quotes at the various U.S. exchanges turned unanimously lower. The losses seemed particularly negative since they came at the same time cattle futures were surging in response to talk of wintry weather forecasts this weekend. If traders were truly concerned about the damage that might be done by snow and cold to poorly established wheat fields, prices would probably have extended their early gains. Thus, the latest drop seemingly bodes ill for the short-term wheat outlook. March CBOT wheat fell 8 3/4 cents to $8.05 1/4 this morning, while March KCBT wheat dove 9 1/2 cents to $8.54 3/4 and March MGE futures tumbled 7 1/4 to $8.95 3/4 per bushel.

Bullish momentum built up by live cattle futures late last week gave the market a strong start to the week this morning. Fundamental optimism about the first quarter outlook almost surely got another boost when meteorologists began forecasting wintry weather over the Northern Plains around mid-week. Harsh wintry conditions can put tremendous stress on feedlot cattle, thereby potentially exacerbating the general tightness of market-ready fed cattle supplies during the weeks and months ahead. A shift in the weather pattern suggesting cold and snow could dominate the Great Plains during the first quarter might send cattle prices substantially higher. The expiring December 2012 contract jumped 1.32 cents to 128.25 cents/pound, while its February and April 2013 counterparts moved up 0.32 and 0.12 cents to 132.92 and 136.92 cents/pound, respectively.

Although wintry weather might also diminish supplies of hogs and pork during the days and weeks ahead, CME swine futures hardly reacted to the weather news powering December cattle futures upward. The fact that so many animals are now raised in confinement conditions probably mitigated the Chicago market response. Bulls and bears may also be undecided as to the ultimate impact, if any, over the likely course of short-term events in the hog and pork complex. That is, bears are almost surely anticipating a major seasonal breakdown in hams during the days ahead, which holds the potential to drag the whole hog and pork complex substantially lower. Conversely, the supply situation routinely tightens after the holiday season, whereas demand for several cuts improves in the new year. The real question for the industry is how much and how quickly the hog and pork complex will rebound in early 2013. February hogs had slipped 0.07 cents to 85.32 cents/pound, as the noon bell was warmed up, while June dropped 0.35 cents to 99.50 cents/pound.